Lyft Driver Taxes in California - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in California?

Yes, absolutely. Income earned as a Lyft driver is taxable at both the federal and California state levels. As an independent contractor, Lyft will not withhold income taxes for you. This means you are responsible for paying these taxes yourself, typically through quarterly estimated tax payments (more on that later).

Federal Taxes: You'll report your Lyft income on Schedule C (Profit or Loss from Business) as part of your Form 1040. Schedule C allows you to deduct business expenses (see section below) to arrive at your taxable profit. The IRS considers you self-employed, meaning you're running your own business, even if it's just you and your car.

California State Taxes: California has a graduated income tax system, meaning the more you earn, the higher the tax rate. This is important because your Lyft income will be added to any other income you have (from a W-2 job, investments, etc.) and taxed at your applicable rate. California rates are generally higher than federal rates, so proper planning and accurate record-keeping are crucial to minimize your tax liability. You'll report your Schedule C profit on California Form 540.

Top Tax Write-offs for Lyft Drivers

Maximizing your deductions is key to reducing your tax bill. Here are some common write-offs for California Lyft drivers:

• Mileage: This is often the biggest deduction! For 2024, the standard mileage rate is approximately 67 cents per business mile driven. Keep a detailed mileage log (date, starting/ending location, business purpose) to substantiate your claim. You can't use both the standard mileage rate and actual expenses (like gas and maintenance) – you must choose one.
• Vehicle Expenses (Alternative to Mileage): If you choose to track actual expenses instead of mileage, you can deduct costs like gas, oil changes, repairs, maintenance, tires, insurance, registration fees, and depreciation. This requires meticulous record-keeping.
• Lyft-Related Software & Apps: Expenses for apps you use specifically for driving (e.g., Stride Tax, Everlance for tracking mileage, tax preparation software) are deductible.
• Phone Expenses: You can deduct the portion of your cell phone bill that is directly related to your Lyft driving activities. Keep records of your usage. (e.g., if 60% of your phone use is for Lyft, you can deduct 60% of the bill).

The 15.3% Self-Employment Tax Surprise

Because you're self-employed, you're responsible for both the employer and employee portions of Social Security and Medicare taxes. This combined tax is 15.3% (12.4% for Social Security and 2.9% for Medicare) on your net earnings (profit) from Schedule C. However, you only pay self-employment tax on earnings over $400.

You'll calculate this on Schedule SE (Self-Employment Tax). The good news is that you can deduct one-half of your self-employment tax from your adjusted gross income on Form 1040, which helps reduce your overall income tax liability.

Closing Tip for California Residents

California's tax laws are complex, and the graduated income tax rates can significantly impact your final bill. I strongly recommend keeping meticulous records of all your income and expenses throughout the year. Consider making quarterly estimated tax payments to the IRS and the California Franchise Tax Board (FTB) to avoid penalties. Consulting with a qualified tax professional (like myself!) can help you navigate these complexities and ensure you're taking advantage of all available deductions and credits. Don't wait until tax season to start thinking about your taxes – proactive planning is the key to a stress-free filing experience.